Precious Metals

Gold and Silver Dividends Are Getting Physical
by Eric McWhinnie - Wall Street Cheat Sheet

March 15, 2012

     

Gold often receives criticism from investors such as Warren Buffett for not producing a yield.  This claim often falls on deaf ears because proven gold miners such as Newmont Mining Corp. and AngloGold Ashanti both pay a dividend north of 2 percent.  However, the downside to these dividends is that they are paid in a fiat currency, somewhat defeating the intentions of gold investors.  A new dividend program seeks to change this process by giving investors the choice to receive dividends in the form of physical bullion, instead of paper or electronic dollars.

Earlier this week, Gold Bullion International announced a new service called The GBI Physical Dividend Program.  The program allows publicly-traded companies to pay dividends to shareholders in the form of physical precious metals.  The first company to participate in the program is Gold Resource Corp., which has 100 percent interest in six high-grade gold and silver properties in Mexico’s southern state of Oaxaca.  The Colorado based company is scheduled to launch its gold and silver dividend program in April.  On Monday, GBI’s chief executive officer, Savneet Singh, said, “There is an increasing demand by both institutional and retail investors to own physical precious metals.  The program we announced today makes this a seamless and simple process for listed companies and their shareholders.”

Don’t Miss: Do Precious Metal Investors Believe QE Will Be Dialed Back?

Gold Resource Corp.’s default dividend payment will be cash, but shareholders will have the ability to convert it into Double Eagle one ounce fine gold or silver rounds, made by the miner.  The company’s supply of Double Eagles will be held at GBI.  “A convenient and easy way of delivering precious metals dividends to shareholders has been a long-term goal of our company,” explained Jason Reid, President of Gold Resource Corp.  Shareholders that convert cash dividends into physical metal may store their bullion within GBI’s insured and audited storage facilities (for a fee), take direct delivery of their precious metals or direct the metals to be shipped to a vault of their choice.  If shareholders do not accumulate enough dividends to convert into gold or silver rounds, they can roll their cash balance into the next month until enough is accrued for conversion.

The dividend conversion price will be set at the London PM Fix on the company’s record date of dividend distribution.  Shareholders are required to direct their individual bullion account for desired gold and silver allocation by midnight EST the day before the record date.  Shareholders interested in converting their cash dividend into precious metals will also be required to hold their shares directly with Gold Resource Corp.’s transfer agent, Computershare.  Meaning, investors may have to move shares from their brokerage account to Computershare by the Direct Registration System.  Once the move is complete, shareholders will be able to open a Gold Resource Corp. on-line individual bullion account with GBI so they can manage their dividends.  The process requires a little time and effort, but after the MF Global disaster, investors should be more than willing to move their shares away from brokers.

The new dividend program paves the way for more miners to follow suit.  As the longevity of fiat currencies come under increasing pressure, more shareholders will recognize the benefits of gold and silver.  Singh added that the new program can be “replicated by other publicly-traded companies and provides investors a choice in how they receive their dividends.  The process we provide is safe, easy and secure, fully insured and audited quarterly.”

Investor Insight: Are Investors Still Bullish on Gold?

If you would like to receive professional analysis on equity miners and other precious metal investmentswe invite you to try our premium service free for 14 days.

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com